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Government Report Suggests Economy Will Rebound In 2021 After Severe Retraction And Record Job Losses The Irish economy will suffer a huge contraction in output and endure record job losses this year, before employment levels recover gradually as output rebounds in 2021, according to the first Government forecasts on the fallout from the Covid-19 crisis.The Finance Minister Paschal Donohoe has warned 220,000 jobs will be lost before a recovery in 2021 with a 5.5% increase in employment - but the economy will not return to where it was at the start of this year until 2022.The predictions are based on restrictions lasting for three months - and GDP could fall by as much as 15 per cent if they last until the end of the year.The Minister said: “The labour market is bearing the brunt of the recession, moving from effectively full employment in the early part of the year to exceptionally high levels of unemployment now and in the coming weeks. Unemployment of 22% is projected for the second quarter."We anticipate that total employment will fall by 9.3% this year, with approximately 220,000 jobs being lost. Next year, employment is expected to grow by 5.5% (115,000 jobs), reducing the unemployment rate to below 10%."The Department of Finance projections - which were prepared as part of the regular cycle of budget oversight by the EU - take on huge significance by throwing a light on the way that officials believe the economy will fare through the unprecedented Covid-19 health crisis.They also show that last year’s budget surplus balloons into a deficit of €23bn this year and remains high next year at a deficit of €13.8bn - such is the scale of the spending on health and employment measures and the hit taken to Government tax revenues over the next two years.Unemployment will rise to an historic peak of over 20% this summer and will fall only gradually through the rest of the year to average almost 14% in 2020 -- close to the worst annual unemployment level recorded at the height of the banking crisis in 2012.It then falls back to average 9.7% in 2021, according to the forecasts.Employment levels will fall to 2.1 million this year, down from the all-time record level of 2.3 million last year, and grows gradually to over 2.2 million in 2021, the department says.The forecasts show that all three measures of the economy - GDP, GNP, as well as Gross National Income (GNI), which strips out the distortions to give a more accurate reading of the size of the economy - show sharp economic contractions.GDP will slump by 10.5% this year and rebound by 6% in 2021; GNP will drop by 11.7% and will grow by over 7% in 2021; while GNI slides by 15.5% this year before rebounding by 9.6% in 2021.Summary of Department of Finance Covid-19 economic crisis forecasts:GDP to fall -10.5% in 2020; to rise 6% in 2021GNP to fall -11.7% in 2020; to rise 7.1% in 2021GNI* to fall -15.5% in 2020; to rise 9.6% in 2021Total employed: 2.10m in 2020; 2.21m in 2021Unemployment of 13.9% in 2020; 9.7% in 2021Budget deficit of -7.4% of GDP in 2020; -4.7% of GDP in 2021Budget deficit of €23bn in 2020; deficit of €13.8bn in 2021Govt debt of 69.1% of GDP in 2020; debt of 68.4% of GDP in 2021Govt debt of 125.1% of GNI* in 2020; debt of 121.6% in 2021HICP inflation: Prices to fall -0.6% in 2020; to rise 0.4% in 2021The Department of Finance says in its commentary that the economy has endured “fundamental change” in a matter of weeks.“In Ireland, large swathes of economic activity have temporarily come to an effective standstill amid efforts to suppress the transmission of the Covid-19 virus,” it says.“The pandemic has also transformed the labour market from one of full employment at the end of 2019 to one in which unemployment is likely to reach its highest level on record in the second quarter before easing back thereafter,” it says.It adds that the forecasts are based on the assumption that the hit to the domestic and international economies will be “transient”.Huge emergency spending on healthcare to fight the disease and the economic costs of the employment measures is reflected in a yawning budget deficit.Last year’s small budget surplus balloons into a deficit of €23bn this year and remains high next year at €13.8bn, the Department of Finance predicts.The budget deficit this year is the equivalent of a deficit of 7.4% of GDP, and a deficit of 4.1% of GDP in 2021 -- compared with a surplus of 0.4% of GDP last ernment debt rises to over 69% of GDP this year, up from 58.8% of GDP in 2019, and settles back at 68.4% in 2021, the forecasts show.However, in terms of GNI, Government debt climbs to over 125% of this measure, up from 99.2% of GNI last year, and will fall back slightly to 121.6% in 2021, the forecasts show.(Source – Irish Examiner – News – Eamon Quinn – 21/04/2020) ................
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